Primary sector told to forget China, target West

Media release 29 November 2007

Primary sector told to forget China and target rich, ageing West

New Zealand’s primary industries have to learn to sell less for more – targeting different consumers in different countries with differentiated products – if they are to prosper.

That was the message 350 delegates at Primary Industries 2020 heard from both an international marketer and a global demographics expert yesterday (Tuesday 28 November).

Brand strategist Brian Richards said too many New Zealanders believed that the country’s wealth came from the land, rather than from its people’s creativity and intelligence.

“This industry, like the rest of New Zealand’s economic position, has been gently sliding back since the 60s as third world nations trade increasingly in our type of commodities. Our response is to throw on more fertiliser, merge more meatworks, bundle more people on to the Milford Track – just more of the same for less revenue …

“There is no more land to mine,” he said. “In some parts of New Zealand, we have mined too much and our precious topsoil is disappearing out to sea. We now, for the first time in our history as an abundant nation, have to learn how to sell less for more.”

To do that, our primary industries have to stop tinkering and start drawing on the New Zealand’s new creative class – its designers, scientists, engineers, architects, musicians and entertainers, whose economic function is to create new ideas, new technology and new content.

And it has to stop targeting young consumers, instead aiming for the “new old”.

“The over-60s in OECD countries are rich, powerful and numerous. They account for half of all discretionary spending power, 75% of all financial assets and 20% of the population.

“It is this older generation, not the cash-strapped young, who will revive a sustained economic recovery in the Western world for years to come,” he said. “They’re going to spend serious money on the planet before they leave it. I am convinced New Zealand could sell less of itself for more to such an affluent market.

“Why bother with the fickle loyalties and preferences of backpackers? The boomer market is a pot of gold.”

Dr Clint Laurent, managing director of Global Demographics Ltd, said exporters should move their focus away from the developing nations of Asia to Europe, North America and affluent Asia – particularly Japan.

China, India and developing Asia has half the world’s population, 67% of its youth and “they are just slightly north-west of here”.

However, young people are going to become a less significant market in the next 12 years. The number of people under the age of 14 will decline in four of the main regions of the world and show virtually no growth everywhere else, he said.

“For every region of the world the number of people over the age of 64 will increase.”

And while the biggest increase in the number of older people would occur in China, few of them will be wealthy enough to buy premium products at a premium price.

“Seventy-seven per cent of earned income of households today is accounted for by 21% of the households,” Dr Laurent said. “Where do you want to be? Three-quarters of the money in the world can be reached by focusing on 21% of the people.”

Those people are predominantly in Europe, North America and affluent Asia, while most households in developing Asia have incomes of less than US$12,000 a year.

Incomes are growing in China and India, but in absolute terms that means very little. “Eight per cent growth per annum in China in any one year adds US$84 to the average household income.” By contrast, 1% growth in Japan added US$1,000 to average household income.

“I think that China probably shouldn’t be a priority for New Zealand. You have got a fairly high cost of goods – most of your products, by the time they land in China, are typically not price competitive. New Zealand actually hasn’t got a good fit, on average, with China. You are a much better fit for those high-growth, highly affluent markets.”

Primary Industries 2020 is a groundbreaking Ministry of Agriculture and Forestry initiative, bringing together businesses and other stakeholders in New Zealand’s largest economic sector.

The two-day Summit is being headed by Jim Anderton, the Minister of Agriculture, Fisheries and Forestry and Biosecurity, and was also addressed this morning by Deputy Prime Minister Michael Cullen and Minister for Climate Change, David Parker.

ENDS

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